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GE Market Trends & Assumptions Catherine Estrampes John Schaeffler Management Institute 2015

GE Healthcare Proprietary and Confidential Information

GE Healthcare

Today’s discussion

Current macro healthcare environment

Policy matters... Control your D.C. destiny

Disruption and Top Healthcare Trends

Our Health Investments Themes

The change imperative


Revenue

$8B 2014

Revenue

$5B 2014

Revenue

$2B 2014

Revenue

$4B 2014

GE Healthcare today

Healthcare IT PACS

RIS

Ambulatory EMR

Caradigm (MS JV)

Life Sciences & Medical Diagnostics

Imaging Tracers

Pathology

Genomics

Bioprocess

Cell technologies

Services Asset Management

Workflow & Efficiency

Quality & Safety

Consulting

Cybersecurity

Healthcare Systems

CT DGS

MR U/S

MI LCS


Healthcare Environment

Medicare

& Medicaid

$1.2T

Social

Security

Discretionary

Defense

Int

Today’s U.S. healthcare economic reality

Federal budget

Healthcare consuming over

40% of gov’t receipts

Gov’t Receipts

$3.1T

Gov’t Outlays $3.8T

Gov’t spending as % of GDP

Federal Health Programs

Social Security

Other Mandatory

Sources: Estimates from The Budget and Economic Outlook (January 2012) - Congressional Budget Office.

Growth projections for Federal

spending


0

1

2

3

4

5

6

7

8 AcIncome

Tax

Soc Sec,

Medicare

Tax

Corp

Tax

Other

6

GE Confidential - Distribute to authorized individuals only. June 2015

Key USA drivers

Data Volume, Variety, Velocity • ‘Data liberation’, maturing clinical systems and quantified

self movement is producing unprecedented amounts of

data readily accessible to healthcare stakeholders

• New data sources, (e.g., clinical, claims, social) collected

near-continuous/continuous, enabling informed insight

Product to Solution • Companies are enhancing product offerings to

emphasize services and packaged ‘solutions’

• Organizations incorporating services, such as

Medtronic Monitoring Center

The Empowered Consumer • Declining actuarial coverage and growth of HDHPs

are shifting the cost burden to the consumer

• Innate consumer principles emerging in healthcare,

including price transparency, search and

scheduling

Mandates Driving Change • A number of initiatives/mandates are aligning

financial incentives with care standards

• Key examples include HCAHPS, VBP, Hospital

Readmissions Reduction Program

Alternative Care Settings • Inpatient volume declining 2-4% annually1,

transitioning to new alternative models that offer

improved cost and convenience

• Retail clinics, urgent care, and telemedicine

establishing themselves as a valuable stakeholder

in system (e.g., 445% growth of retail clinics ‘06-

’142)

Convergence of Devices • Clinical devices are becoming more experiential;

consumer devices are trying to prove clinical efficacy

• FDA approved digital devices have grown by 21%

over the past 4 years and expected to triple by 20182

Technology Regulatory Economics Demographics Drivers:

1 Sg2 2013 Outlook 2 Accenture Research


Consolidation & Purchasing Control

Inte

gra

tio

n A

cc

ou

nta

bil

ity

Large Health Systems/

High Central Control

Smaller Health Systems/

Limited Control

Less Clinically Integrated/

Limited Ability to Manage Risk

Highly Clinically Integrated/

Actively Assuming Risk Local Progressives

Local Traditionalists

Progressive Consolidators

Hospital Aggregators

2014 2020 % of Mkt 29% ~20%

2015 2020 % of Mkt 12% ~35%

2014 2020 % of Mkt 35% ~15%

2015 2020 % of Mkt 24% ~30%

• Centralized functions & decision-making, driving

clinical integration across settings

• Taking steps toward risk/pop health

• Centralized functions & decision-making

• Limited clinical integration, hospital-centric

• Limited move toward bearing risk

• Limited consolidation, small scale

• Accepting greater accountability for care

• Likely to be standalone hospitals without broader

systems of care

• Likely to acquired or rationalized

Emerging provider landscape

Economic realities… ~10 pt margin swing

Sources: L.E.K. and GE Analysis GE Healthcare Proprietary and Confidential Information

Commercial

Medicare

Medicaid

Uninsured

40%

20

0%

(20)

(40)

(100)%

Health System Payer Mix

Op

era

tin

g M

arg

in %

0 25 50 75 100

Avg Margin: 3.5%

Comm’l

Medicare

Medicaid

Uninsured

40%

20

0%

(20)

(40)

(100)%

Health System Payer Mix

Op

era

tin

g M

arg

in %

0 25 50 75 100

Avg Margin: (6.5)%

Exchange TODAY 3.5%

Medicaid +2%

Expansion

Aging/ -4%

Medicare

Exchanges -3%

Reimburse -2%

Cuts

Comm’l Rates -3%

2020 Outlook -6.5%

Today 2020 Outlook

Sources: L.E.K. and GE Analysis.

Policy matters… Control Your D.C. Destiny

Imagination at work.

Columbus, Ohio November 6, 2015

GE Healthcare Government Affairs & Policy Update OSU – HSP Management Institute

Who are these people?


GE’s unique 360o perspective on healthcare

GE Company 600,000+ covered lives

GE Healthcare Broad solutions for healthcare



How we engage– the GA&P model

Prioritize Issues

Align with business to identify critical issues

Compliance

Uphold the Spirit & Letter…always with unyielding integrity

GEPAC

campaign contributions

Community Service

GE Volunteers

Affinity Groups

Executives

Grass Roots

Economic footprint

Suppliers

Industry Leadership

Trade Associations

Coalitions

Tier 1

Tier 2

Tier 3

Health care policy environment


Budget Deal: What does it mean to you?

ACA/“Obamacare” Not a top priority – and not THE priority

New care delivery models (ACOs, pop health)

Equalizing payments across sites of service

“Doc Fix” – Done! Is this a good thing?

CMS unbridled authority

GEHC GR policy priorities


• Medical Device Tax Repeal/Delay

• CEO Imperative -- Payment Differential/Dose Reduction

Implementation of CT Dose (Passed 2014)

Version: 2.0: begin process of identifying next gen modality (e.g., Interventional radiology; Tomo)

• Fight Medicare Imaging Cuts for GEHC Customers

What to watch for in the remainder of

the 114 Congress?

What to do with what is left?


• House in Disarray – Speaker Ryan? Why?

• Very few Legislative Days to work

• House Historically Republican – will stay that way

• 14 Months of Obama

• Agenda is Limited – Vehicles Matter

• One Big Budget • Debt Ceiling

• Tax Extenders

• Highway Bill

Crowded Field

Out

Out

Ready For…

OUT

OUT

OUT

5 things healthcare leaders need to know/do:


1) Be on first name basis with the Health Exchange

Executive Director

2) Have a relationship with who runs Medicaid in my states

– and know what direction the politics are leading us?

3) Ensure that there is a Policy/Government Relations/

Reimbursement Leader on my Board

4) Figure out what your System wants – then ask for it! –

BEND POLICY TOWARD THE OFFERING

5) Lock arms in stronger way with industry partners to

defend the healthcare industry!

Disruption and Top Healthcare Trends

22 CONFIDENTIAL PAGE

DISRUPTION IS OCCURRING ACROSS INDUSTRIES

SHOP EXPLOR

E

ENTERTAI

N

HEAL LEARN

23

GE Confidential - Distribute to authorized individuals only. June 2015

Ten disruptive trends Emerging trends in healthcare are accelerated by changes in technology,

consumer expectations and regulatory environments

Precision Medicine Consumer Expectations

Medical decision, practices,

products tailored to the

individual

Increased consumer role in

healthcare; demand similar

experiences from other

industries

1 5

Colossal Clash

High Deductible World

Clinical and consumer health

solutions are on-track to

collide

Declining actuarial coverage

and growth of HDHPs are

shifting the cost burden to the

consumer

2

6

Owning the Journey

New Entrants

Offering products and services

along end-to-end patient

journey

Non-traditional companies

and start-ups are entering

healthcare

3

7

Care Anywhere

Data Explosion

New care delivery models are

offering care beyond traditional

settings

Data liberation due to digital

technologies and government

initiatives

4

8

‘CapX to OpX’ Cost pressures are driving

companies to manage capital

efficiently and get the most value

out of their investment

10

New Sensing Options

New tools and technologies

that enable next generation

diagnostics

9

Our Health Investment Themes

25

July 2015 GE Confidential - Distribute to authorized individuals only.

Theme

Description

Select

Investments /

Partnerships

Minimally Invasive

Procedures Devices that enable

new less invasive

methods to deliver

therapies &

diagnostics

Precision Medicine

Life science tools and

diagnostics that enable

a new era of

personalized care

HCIT & Services

Software and

connectivity solutions

that improve efficiency

and decision making

Digital Health

Use of combinations of

devices, sensors,

software, services and

data to improve patient

care

Brain Health

Innovative approaches for

identifying and improving

brain health and

preventing brain injury

Business GE Ventures

9

GE health investment themes

The Change Imperative

27 Confidential Page

“ The future is already here – it’s

just not very evenly distributed.”

- William Gibson

Author and Futurist

Time to Act Disrupt or be disrupted

Iterative Innovation People, process, and technologies

Transformation: Revolution, not Evolution Asset rationalization / optimization and new models of care

All Eyes on the Consumer Attract / retain, engage, shift from patient consumer

LOOKING FORWARD, EYES WIDE OPEN

10

28

July 2015 GE Confidential - Distribute to authorized individuals only.

PROVIDER QUESTIONS FOR CONSIDERATION

Five key questions your organization should be discussing:

Source: Accenture, GE Ventures

Is my organization a disruptor or is it being disrupted? • Demographics, pace of change, competitive intensity, payer & employer strength, physician

alignment

1 Are we taking an outside in view or ‘more of the same’?

• Performance improvement or ‘blank’ slate strategy and innovation 2 Are we positioned to be a health business or a medical business?

• Shift from inpatient to outpatient, FFS to FFV and patient to consumer 3 Do we have the resources that are required to win in the future?

• Labor and non-labor resources / assets, executive and project talent 4 How are we creating a culture of agility and innovation?

• Shifting risk tolerances and creating enterprise innovation amidst a climate of continuous compliance 5

11

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